Japanese electronics industry debates future amid turmoil

Japanese engineers from competing electronics companies gather in one room to exchange punches, parries, and predictions for Japan's electronics industry.

HAKONE, Japan – As Japan’s ailing electronics manufacturers continue to lay off engineers by the thousands, the next move here is a focus of intense speculation around the global electronics industry.

Pontificating doom and gloom for Japan from afar is easy. Harder is to gather together a number of Japanese engineers -- all working at competing electronics companies -- in one room and actually ask them straight questions. What do they think has gone wrong, and what do they believe will be the fate of their employers, their jobs and the whole shootin’ match?

It took a Chinese-American CEO running a design service company in Shanghai to pull that off.

Wayne Dai, CEO of VeriSilicon, invited this past weekend (April 20) a dozen Japanese engineers who hold positions (or previously held positions) at rival companies such as Sony, Renesas, NEC, Hitachi, Panasonic, Fujitsu and MegaChips for a weekend retreat in Hakone -- roughly a two-hour train/cab ride from Tokyo. Also invited were VeriSilicon board members including Clark Jernigan, a venture partner at Austin Ventures, and Marco Landi, former chief operating officer at Apple Inc.

For Dai, once a professor of computer engineering at the University of California at Santa Cruz, the mission of his “Japanese Semiconductor Executive Forum” in Hakone was plain and simple. He wanted to probe the future of Japan’s electronics industry through the eyes of “open-minded Japanese engineers,” as he put it. He encouraged everyone who attended to think and speak freely as individuals, not as corporate spokesmen. Dai sought from his guests, before concluding the retreat, a consensus on five “specific” predictions -- what will happen to Japan’s electronics industry -- in precise language.

That he and his group did.

I was invited as a speaker and a participant -- on one condition. Although I’m allowed to report on the Forum, I agreed not to attribute quotes to any participant by name. Seeing a rare opportunity for a reporter to be a fly in the wall, this stipulation was a no-brainer. But I did exchange business cards with every participant, so I can be sure whom I’m not quoting.

Not everyone originally invited was able to make it to the event, however. An engineer at Fujitsu Semiconductor had to be elsewhere, to discuss his early retirement package with his employer. [Fujitsu has decided to shed 2,000 employees before spinning off its SoC business into a joint fabless design company with Panasonic.] An engineer at Panasonic also begged off, citing personal reasons.

Everyone who came had already given a lot of thought to what’s gone wrong with Japan’s electronics industry.

A Sony engineer observed that the decline of Japan’s SoC business comes down to one thing. “The whole SoC business model has changed to ‘turnkey solutions.’” Japanese semiconductor companies, without a turnkey solution, have no choice but to provide semi-custom SoCs to high-end CE manufacturers whose market share is shrinking. “We’ve been squeezed,” he said.

Chip's comments illustrate a couple points I've been trying to make. One is that the question is outside just engineering decisions, it involves economics and ITS LAWS. And these laws defy national boundaries.
Also his remarks display a certain desperate helplessness. All 'must' do this, that or the other thing. Says who? Nobody's in control. It's Smith's 'Invisible Hand' gone amok.

Japan has pretty much lost the huge Consumer Electronics market in the US & W. Europe to So. Korea, Taiwan and China. If unlike Europe, Japan does not want to let go of this low margin but high volume segment, then they have to compete with So. Korea in terms of NPI, with China on the basis of price. The article mentioned something about sticking to 20 year reliability even for DRAM for throwaway Consumer products ! Thats a no no ! The Japanese must re-examine all their assumptions and quickly change course accordingly. This means faster development cycles ( more science & simulation and fewer experiments ), more robotics ( even if it causes more unemployment among factory workers - at least there will be more money from exports to retrain them in something else ). Otherwise I am afraid it would be 1945 all over again. I say this as a well wisher who has managed semiconductor projects in Japan.

While I agree that engineers might and should see themselves as free agents, reality in the semiconductor industry is that they will work for a mid-size to large company. The economics of making chips do not lend themselves to true free agency, i.e., being a consultant for one's own firm. Please let me know how I'm wrong on this b/c I'd love to throw up my own shingle.

Probably a dumb thing to say, but was there any discussion about the "overwork" culture in Japan? Having visited there a few times, I could never come to terms that tired Japanese engineers were staying in office, day after day, not going home, rarely spending time with their families - at times simply because their bosses were at office.
On an individual level, can not such pressure sap the mind of creating innovative ideas and the pleasure of working on technology?

I was most interested in reading about how Japanese engineers identify themselves with a company, in which they fully expected to devote their entire careers. So even that, like the rest of the topics covered, strikes me as something that the US and European electronics industries have already gone through.
My own "paradigm shift" when this was going on was that engineers now, in the US, are seen by their fellow engineers much more like free agents. It's your name and your reputation that matters most and that precedes you, not so much the company you happen to work for today.
I remember at the start of my career, that a more seasoned engineer told me, "You don't owe any loyalty to the company." It sounded a bit harsh at the time, but with the big layoffs in the early to mid 1990s, I could see exactly what he meant. You owe loyalty to yourself first and foremost. The company can and will lay you off at the drop of a hat, if the bottom line doesn't add up right.

I worked as a Principal Engineer in the late 80's through the early 90's at a fairly large company that rather quickly went from the industry's darling to a hopeless basket case. That was Digital Equipment Corporation (DEC).
I learned and gained experience from looking at projects from a systems perspective. After DEC failed to perform to expectations and then evaporated, I looked at that experience too, from a systems perspective.
It's on a bigger scale but I believe also that the performance of a national industry must also be seen as part of a bigger system. The article here referenced decisions by government agencies including banks.
The article raised organization, vertical as opposed distributed, etc.